NEWS RELEASE

R&I Affirms A+, Stable: Daiwa House Residential Investment Corp.


Dec 02, 2014
Rating and Investment Information, Inc. (R&I) has announced the following:

ISSUER: Daiwa House Residential Investment Corp. Issuer Rating: A+, Affirmed Rating Outlook: Stable RATIONALE:

Daiwa House Residential Investment Corp. (DHI) is a residential REIT sponsored by Daiwa House Industry Co., Ltd. As a result of a merger with New City Residence Investment Corp. in April 2010, its asset size increased sharply.
DHI invests in relatively new, conveniently located rental residences primarily in the 23 wards of Tokyo. Properties in this area account for 71% of total on an acquisition price basis, and the average property age is comparatively low at 9.1 years (as of August 2014). The number of leasable units exceeds
10,000, suggesting a significant degree of diversification. With a high occupancy rate of 96-97%, cash flow is very stable.
While soaring real estate prices have slowed its property acquisition, DHI continues to purchase
properties selectively, mainly from the sponsor group. R&I believes that DHI will be able to achieve some external growth on an ongoing basis by capitalizing on the sponsor's pipeline.
DHI plans to invest up to around 5% of its total portfolio in senior housing, for which demand is likely to
grow. It has acquired two such properties so far. For both properties, a rent-guaranteed master lease agreement has been concluded with Daiwa House Industry to ensure stable cash flow.
As regards aging properties, DHI is working to maintain and improve competitiveness and reduce
costs by formulating a repair plan tailored to each property.
DHI's target LTV range is 50-55%. While this is somewhat high as is the case with other residential REITs, its LTV has fallen to 51%. With a continued improvement in the appraisal value of existing properties, unrealized gains increased to 15.2 billion yen (as of August 2014).
Funding keeps going well. On the back of the sponsor's high creditworthiness, DHI has been able to
raise funds stably principally through long-term fixed rate debt, though small borrowings in 2014 led to a slightly shorter average remaining term to maturity. Refinancing of rehabilitation obligations due in January 2015 is expected to help DHI extend its maturity profile and reduce financing costs further.
The Rating Outlook is Stable. DHI's steady cash flow, diversified portfolio and strong support from the sponsor with a proven track record are among its advantages. Thanks to improved leverage and a stronger funding base, its creditworthiness is gaining stability.
The primary rating methodologies applied to this rating are provided at "Basic Methodologies for R&I's Credit Rating" and "Rating Methodology for J-REIT". The methodologies are available at the web site listed below, together with other rating methodologies that are taken into consideration when assigning the rating.
http://www.r-i.co.jp/eng/cfp/about/methodology/index.html

■Contact : Investors Service Division TEL.+81-(0)3-3276-3511 E-mail. infodept@r-i.co.jp

■Media Contact : Corporate Planning Division (Public Relations) TEL.+81-(0)3-3276-3438

Rating and Investment Information, Inc. Nihonbashi 1-chome Mitsui Bldg., 1-4-1, Nihonbashi, Chuo-ku, Tokyo 103-0027, http://www.r-i.co.jp

Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are not statements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.

R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is not liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details, please refer to http://www.r-i.co.jp/eng/policy/policy.html. © Rating and Investment Information, Inc.

NEWS RELEASE

ISSUER: Daiwa House Residential Investment Corp. (Sec. Code: 8984) Issuer Rating RATING: A+, Affirmed RATING OUTLOOK: Stable

■Contact : Investors Service Division TEL.+81-(0)3-3276-3511 E-mail. infodept@r-i.co.jp

■Media Contact : Corporate Planning Division (Public Relations) TEL.+81-(0)3-3276-3438

Rating and Investment Information, Inc. Nihonbashi 1-chome Mitsui Bldg., 1-4-1, Nihonbashi, Chuo-ku, Tokyo 103-0027, http://www.r-i.co.jp

Credit ratings are R&I's opinions on an issuer's general capacity to fulfill its financial obligations and the certainty of the fulfillment of its individual obligations as promised (creditworthiness) and are not statements of fact. Further, R&I does not state its opinions about any risks other than credit risk, give advice regarding investment decisions or financial matters, or endorse the merits of any investment.

R&I does not undertake any independent verification of the accuracy or other aspects of the related information when issuing a credit rating and makes no related representations or warranties. R&I is not liable in any way for any damage arising in relation to credit ratings (including amendment or withdrawal thereof). As a general rule, R&I issues a credit rating for a fee paid by the issuer. For details, please refer to http://www.r-i.co.jp/eng/policy/policy.html. © Rating and Investment Information, Inc.

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